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FROM THE OFFICE OF PUBLIC AFFAIRS September 9, 1998RR-2672 The Administration has expressed strong opposition to the Financial
Modernization legislation, H.R. 10, in its current form and has stated that the bill will be vetoed
unless significant changes are made. A key issue in the current discussions about H.R. 10 involves the obligations of financial
institutions to serve the credit and other banking needs of low- and middle-income Americans.
Recent reports indicate that proposals may be considered that would undermine the Community
Reinvestment Act. I want to make clear that any efforts to undercut CRA, as well as any
proposals
that would provide the opportunity for depository institutions to evade CRA responsibilities,
would
be unacceptable to the Administration. The failure to extend CRA to all wholesale financial institutions, which will enjoy access to
such benefits as the discount window and the payments system, would open opportunities for
significant evasion of CRA and are not justified. The elimination of the requirement in the
House-passed version of H.R. 10 for a satisfactory CRA rating as a prerequisite for eligibility for
new powers would erode CRA enforcement by removing an important incentive for banks to
demonstrate CRA performance. Finally, restrictions that would prohibit banks from conducting
new
financial activities through subsidiaries, which we have opposed for other reasons as well, would
tend to force bank resources into affiliates and would thus have seriously adverse consequences
for
CRA .
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